El Salvador Weekly: Four Questions for President Bukele on ‘Doubt’ Surrounding Bitcoin

Salvadoran President Nayib Bukele added his voice to the bragging ministers after the United Nations World Tourism Organization’s (WTO) Aug. 1 World Tourism Barometer report placed El Salvador as one of only 16 countries that have seen their international tourism receipts fully recovered to pre-pandemic levels.

While his ministers pointed to bitcoin, saying that crypto-based tourism had a lot to do with it, Bukele shared the credit a bit further, saying, “the reasons behind it are mostly #Bitcoin and surf.”

But, he added, internal tourism is growing even faster, “mainly because of our crackdown on gangs.”

Only a handful of countries have been able to recover its tourism to pre pandemic levels.

And that’s international tourism, so the reasons behind it are mostly #Bitcoin and surf 🤙🏼

But internal tourism is growing even more, mainly because of our crackdown on gangs. https://t.co/mBbarohmoZ pic.twitter.com/Iy6mFliicJ

— Nayib Bukele (@nayibbukele) August 6, 2022

Pointed Questions

El Diario de Hoy, however, has four questions for Bukele that it said must be answered, as there are “doubts about Bitcoin that persist eleven months after its adoption.”

Starting with the numbers, the media outlet cited $107 million spent on 2,381 bitcoins, $120 million to give every citizen $30 worth of bitcoin to incentivize them to open a Chivo Wallet, and another $150 million for a trust fund.

What El Diario said it doesn’t know — and what made it put quote marks indicating doubts around the word “2,381 bitcoins that the country ‘possesses’ in its reserves” — is this:

• “Who authorized the purchases?” The Legislative Assembly hasn’t issued any decree or law that allows to government to allocate any funds to purchase bitcoins, it said.
• “Who controls those bitcoins?” “Due to the opacity of the government in everything related to Bitcoin, it is not known who has control of these crypto assets,” the paper said. “However, Bukele affirms that he makes purchases from his phone.”
• “How much has been spent on the implementation of Bitcoin as a legal tender?” While it’s impossible to put an exact amount on the spending “due to the government’s opacity,” El Diario said the true figure could amount to about $450 million, according to economists consulted.
• “From which portfolio do the funds for these purchases come?” El Diario said that because there is no “legislative decree that specifies the origin of the money to make these purchases,” it is unknown if it was coming from that Bitcoin Trust or somewhere else.

While the article didn’t specify beyond the $377 million cited earlier, one possible source of those numbers is the price the country has had to pay to borrow on the sovereign debt market. Ratings agencies, unsettled by a number of issues including both the bitcoin experiment and the lack of detail about it, have slashed the economically-struggling country’s bond rating far into junk territory.

Read more: El Salvador Weekly: Morgan Stanley Says Buy El Salvador Bonds (at 28 Cents on the Dollar)

In fact, it’s been cut so much that Morgan Stanley’s global head of emerging-market sovereign credit strategy advised clients to buy Salvadoran debt because, at 28 cents on the dollar, the country is being “overly punished,” even with the threat of a debt default at the beginning on next year.

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